The Investment Act: A new regulatory framework for establishment and distribution of hedge funds in the German investmen
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Volume 5 Number 4
The Investment Act: A new regulatory framework for establishment and distribution of hedge funds in the German investment market Bjo¨rn Reinhardt* and Udo Zillmann** *Altko¨nigstraße 7, 60323 Frankfurt am Main, Germany Tel: +49 69 71 40 89 71; e-mail: [email protected] **Markgrafenstraße 5, 60487 Frankfurt am Main, Germany Tel: +49 17 37 14 12 03; e-mail: udozillmann@smeetshaaswolff.com
Bjo¨rn Reinhardt is currently compiling a PhD thesis on new municipal financing models and recently joined the financial market regulatory team in the Frankfurt office of Linklaters Oppenhoff & Ra¨dler as an associate. Udo Zillmann is an associate at the Frankfurt law firm Smeets Haas Wolff. Both authors advise in financing transactions and financial market regulatory issues.
Journal of International Banking Regulation, Vol. 5, No. 4, 2004, pp. 358–363 # Henry Stewart Publications, 1358–1988
Page 358
ABSTRACT The new Investment Act came into force in Germany as a part of the new German Investment Modernisation Act on 1st January, 2004. This paper focuses on the provisions of the new Investment Act, which allows the establishment and distribution of hedge funds in Germany for the first time. It begins with a brief introduction regarding the contents of the Investment Modernisation Act and continues with a summary overview of the regulatory framework for hedge funds under the new German investment law. In particular it adresses the new legislative structure provided for hedge funds and the requirements for the establishment of domestic hedge funds and the public distribution of domestic and foreign hedge funds under the new Investment Act.
INTRODUCTION On 1st January, 2004 the German Investment Modernisation Act (Gesetz zur Modernisierung des Investmentwesens und zur Besteuerung von Investmentvermo¨gen),1 which includes the new Investment Act (Investmentgesetz) and the new Investment Tax Act (Investmentsteuergesetz)2 came into force in Germany. In particular, the Investment Act, which as a core component of the German Federal Government’s Financial Market Stimulation Plan 2006 (Finanzmarktfo¨rderplan 2006),3 shall contribute to the creation of the future regulatory framework for the German financial market,4 introduces substantial changes to the German investment market law. For this purpose, the Investment Act supersedes the provisions of the German Investment Companies Act (Gesetz u¨ber Kapitalanlagegesellschaften) and the Foreign Investment Act (Auslandinvestmentgesetz), which were effective until 1st January, 2004. Among several other measures,5 the Investment Act now creates the prerequisites for the establishment and direct distribution of hedge funds6 within the German investment market for the first time.7
Reinhardt and Zillmann
PROVISIONS OF THE INVESTMENT ACT REGARDING THE ESTABLISHMENT AND DISTRIBUTION OF HEDGE FUNDS General provisions regarding the establishment of domestic hedge funds Under the new Investment Act, a domestic hedge fund can now be established by means of two different legal entities. First
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